The USD/JPY pair lost its momentum and dropped to around 157.75 during the early Asian session on Friday.
Tokyo CPI Inflation Figures
The Tokyo Consumer Price Index (CPI) inflation data showed some changes. The headline Tokyo CPI inflation climbed to 3.0% year-on-year in December from 2.6% in November. Meanwhile, the Tokyo CPI excluding Fresh Food and Energy reached 2.4% YoY in December compared to 2.2% before. Also, the Tokyo CPI excluding Fresh Food rose 2.4% YoY in December, against the 2.5% that was expected and up from 2.2% in November. These readings might keep the Bank of Japan (BoJ) on track for a January interest rate hike.
BoJ Governor’s Statement
BoJ Governor Kazuo Ueda said last week that the central bank expects the Japanese economy to move closer to sustainably achieving the BoJ’s 2% inflation target next year. He also stated that “The timing and pace of adjusting the degree of monetary accommodation will depend on developments in economic activity and prices as well as financial conditions going forward.”
Impact on the US Dollar
On the side of the US Dollar, the expectation of fewer rate cuts by the US Federal Reserve (Fed) could support the Greenback in the near term. The Fed cut interest rates by a quarter point in the December meeting and projected just two rate cuts in 2025, down from its original forecast for four. Additionally, trading volumes are likely to be low ahead of next week’s New Year holiday.
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